Trilogy Metals Reports Third Quarter Fiscal 2017 Financial Results
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News Release
Trilogy Metals Reports Third Quarter Fiscal 2017 Financial Results
October 5, 2017 - Vancouver, British Columbia – Trilogy Metals Inc. (TSX, NYSE
American: TMQ) (“Trilogy”, "Trilogy Metals” or "the Company”) is pleased to report its third
quarter results for the period ended August 31, 2017. Details of the Company's financial
results are contained in the unaudited interim consolidated financial statements and
Management's Discussion and Analysis which will be available on the Company's website at
www.trilogymetals.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. All
amounts are in United States dollars unless otherwise stated.
Third Quarter 2017 Highlights:
Strong working capital position of $11.2 million, with cash on hand of $10.2 million.
The focus of this third fiscal quarter has been working to advance our Upper Kobuk
Mineral Projects. With a combined 2017 budget of $17.1 million for the Bornite and
Arctic Projects, this quarter was busy at our project sites in northwest Alaska.
Financial partnership announced with South32 Limited in Q2 2017 granting an option to
form a 50/50 joint venture for a minimum investment of $150 million, subject to
certain adjustments. South32 is required to fund a minimum of $10 million per year, for
up to three years to keep the option in good standing.
Bornite Project
We are currently executing a $10 million exploration program at the Bornite Project, funded by
South32 Limited (ASX/JSE/LSE : S32), (“South32”) under an Option Agreement on the
Company’s Upper Kobuk Mineral Projects (“UKMP”) announced on April 10, 2017 (“Option
Agreement”). The focus of this year’s program is to target high-grade copper mineralization
north and east of the previously identified resources which were last drilled by the Company in
2013. This year’s exploration at Bornite was approved by a joint Trilogy-South32 Technical
Committee.
Under the terms of the Option Agreement, we granted South32 the right to form a 50/50 joint
venture to hold all of the Company’s Alaskan a ssets currently held directly by our wholly
owned subsidiary NovaCopper US Inc., doing business as Trilogy Metals US (“Trilogy Metals
US”). Upon exercise of the option, Trilogy Metals US will transfer its Alaskan assets, including
the UKMP and South32 will contribute a minimum of $150 million, subject to certain
adjustments, to a newly formed 50/50 joint venture.
To maintain the option in good standing, South32 is required to fund a minimum of $10 million
per year for up to a three year period, which funds will be used to execute a mutually agreed
upon program at the UKMP. South32 may exercise its option at any time over the next three
years to enter into the 50/50 joint venture. Provided that all the exploration data and
information has been made available to South32 by no later than December 31 of each year,
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South32 must decide before the end of January of the following year whether: (i) to fund a
further tranche of a minimum of $10 million, or (ii) to withdraw and not provide any further
annual funding. If the election to fund a further tranche is not made in January, South32 has
until the end of March to exercise the option to form the LLC and make the subscription
payment.
This year’s exploration program at Bornite is one of the larger programs in the history of
drilling at the Bornite Project. With an appr oved budget of $10 million, we plan on drilling
approximately 9,000 meters at Bornite this fi eld season to test the extension of the
mineralization from the drill holes from our 2013 drill campaign along with a ground gravity
survey, continuation of hydrology data collection and initiating metallurgy and acid based
accounting for Bornite.
Drilling at the Bornite Project began in early June and is expected to be finished by
mid-October with results released throughout the fall. We completed 6,037 meters by August
31, 2017 and released our first results on Se ptember 18, 2017 from the first three holes
comprising 3,083 meters.
Arctic Project
In early June 2017, we announced the engageme nt of Ausenco Engineering Canada Inc. to
prepare the Arctic Project Pre-feasibility Stud y (“PFS”) technical report anticipated to be
complete in Q1 2018. The Company has also engaged Amec Foster Wheeler to complete mine
planning and SRK Consulting (Canada) Inc. to complete tailings and waste design, hydrology
and environmental studies.
The summer field program for the Arctic Project PFS was conducted in July with the completion
of 257 meters of geotechnical drilling and 26 test pits completed to determine site facility
locations and mine design. We also completed geophysical ground surveys to evaluate ground
conditions. We continued our environmental baseline program through the summer of 2017
which includes baseline data collection on aquatic and avian resources, ongoing water quality,
hydrology and meteorology. The water qualit y program was expanded in 2017 to include
additional sample locations and increased sample frequency.
The results from this summer’s field program are currently being compiled and analyzed by the
PFS consultants. We currently anticipate the completion of the PFS in Q1 2018.
We also completed 455 meters of in-fill drilling at Arctic in late August collecting PQ size core
to provide two tonnes of material for an ore- sorting study to be initiated in Q4 2017. We
anticipate releasing assay results for the additional Arctic in-fill holes by November. The
results of the ore sorting program will be evaluated in Q1 2018.
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Selected Results
The following selected financial information is prepared in accordance with U.S. GAAP.
in thousands of dollars,
except for per share amounts
Three months ended Nine months ended
Selected expenses August 31,
2017
$
August 31,
2016
$
August 31,
2017
$
August 31,
2016
$
Foreign exchange (gain) loss (592) 3 (542) 8
General and administrative 273 311 1,050 1,030
Mineral properties expense 8,471 3,077 10,407 4,067
Professional fees 86 84 404 430
Salaries 218 250 683 719
Salaries – stock-based compensation 104 146 603 544
Unrealized loss on held for trading
investments
83 - 1,252 -
Loss from continuing operations for the
period
8,992 3,902 14,378 6,885
Loss from discontinued operations for the
period
- 353 - 712
Loss and comprehensive loss for the period 8,992 4,255 14,378 7,597
Basic and diluted loss per common share $0.09 $0.04 $0.14 $0.07
For the three months ended August 31, 2017, Tr ilogy reported a net loss of $9.0 million (or
$0.09 basic and diluted loss per common share) compared to a net loss of $4.3 million for the
corresponding period in 2016 (or $0.04 basi c and diluted loss per common share). This
variance of $4.7 million was primarily due to the size of the field programs at the UKMP in 2017
as well as the timing of the program. An increase of $5.4 million in mineral property expenses
incurred during the three months ended August 31, 2017 compared to the three months ended
August 31, 2016 accounted for the increase in its entirety. The 2017 program consists of a
$10.0 million exploration program at the Bornite Project, funded by South32, and a $7.1
million program towards completing a pre-feasibility study at the Arctic Project expected to be
completed in Q1 2018. Comparably, in 2016, the field program consisted of a drill program at
Arctic to prepare the project for pre-feasibility work. The field program in 2017 began in late
May and continued through the third quarter. In 2016, the field program consisted of a 45-day
program that wrapped up in late July. The increase in the mineral property expenses is due to
the size and variety of the programs being un dertaken. The increase was offset by slight
decreases in general and admi nistrative, salaries and stoc k-based compensation expense
during the three months ended August 31, 2017 compared to the three months ended August
31, 2016.
Trilogy recognized a gain on foreign exchange during the three months ended August 31, 2017
of $0.6 million due to the apprec iation of the Canadian dollar in the current fiscal year. We
were holding a higher average volume of cash and cash equivalents in Canadian dollars during
the third quarter of 2017 mainly due to the sale of investments which consist of shares in Gold
Mining Inc. (“GMI”). The investments are also denominated in Canadian dollars and benefited
from the appreciation of the Canadian dollar in the third quarter. We acquired the investments
on September 1, 2016 as consideration for the sale of Sunward Investments Limited
(“Sunward”) and its Titiribi gold-copper exploration project in Colombia. As such, a
comparable foreign currency movement did not exist in the third quarter of 2016. There was
also a loss from discontinued operations of $0.4 million for the three months ended August 31,
2016 which relates to the sale of Sunward. There is no comparable amount in the current fiscal
year as the sale was completed on September 1, 2016. Other minor differences noted for the
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comparable periods were i) a small decrease in general and administ rative expenses; ii) a
small decrease in salaries due to lower level of staff in the third quarter of 2017 compared to
2016; and iii) a small decrease in stock-based compensation due to the timing of the
amortization of expense.
The basic and diluted loss per common share of $0.09 for the three months ended August 31,
2017 increased from the basic and diluted lo ss per common share of $0.04 for the three
months ended August 31, 2016 due to the increased loss as described above.
For the nine months ended August 31, 2017, Trilogy reported a net loss of $14.4 million (or
$0.14 basic and diluted loss per common share) compared to a net loss of $7.6 million for the
corresponding period in 2016 (or $0.07 basi c and diluted loss per common share). The
increase in net loss is primarily due to an increase in mineral property expense of $6.3 million
from $4.1 million for the nine months ended August 31, 2016 to $10.4 million for the nine
months ended August 31, 2017. Similarly to the variance in the three-month periods, the field
program being executed in 2017 is significantly larger and more varied than the field program
completed in 2016. The variance is also due to an unrealized loss on investments on the GMI
securities of $1.3 million classified as held for trading for which changes in the fair value of the
investments are recorded through the statement of loss. There are no comparable amounts for
the nine months ended August 31, 2016 as the Company ac quired the investments in
September 2016.
Trilogy recognized a gain on foreign exchange during the nine months ended August 31, 2017
of $0.5 million due to the appreciation of the Canadian dollar in the current quarter as well as
the volume of funds held in Canadian dollars. There is no comparable amount in 2016 due to
the timing of acquiring the GMI investments. Additionally, there was a loss from discontinued
operations of $0.7 million for the nine months ended August 31, 2016 from the operations of
Sunward for which there is no comparable amount in 2017. Other minor differences noted for
the comparable periods were i) a small increase in general and administrative expenses; ii) a
small decrease in professional fees due to a lower level of corporate activity compared to 2016,
iii) a small decrease in salaries due to lower level of staff in the third quarter of 2017 compared
to 2016; and iv) a small increase in stock-based compensation due to increasing Black-Scholes
valuations from an increased share price.
The basic and diluted loss per common share of $0.14 for the nine months ended August 31,
2017 increased from the basic and diluted loss per common share of $0.07 for the nine months
ended August 31, 2016 due to the increased loss as described above.
Outlook
Our 2017 program has a total budget of $17.1 million with $7.1 million to be expended during
the fiscal year to advance the Arctic Projec t to pre-feasibility and $10.0 million for the
exploration program at the Bornite Project. The Arctic Project PFS will be supported by
information collected during the 2015 - 2017 field seasons. The completion of our 2017 field
program has completed a staged three-year si te investigation program where the first two
years focused almost exclusively on collectin g data in and around the proposed Arctic
open-pit, and the third year focused on infrastructure and mine design. The Arctic Project PFS
is anticipated to be completed in Q1 2018.
The exploration program at the Bornite Project is an opportunity to potentially expand the size
of the Bornite deposit by drilling the extensions of mineralization last drilled by the Company
in 2013. It is expected that approximately 9,000 meters will be drilled at Bornite which drilling
will be focused entirely on testing the size and depth of the extension of the known deposit.
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Qualified Persons
Andrew W. West, P.Geo., Exploration Manager for Trilogy Metals Inc., is a Qualified Person as
defined by National Instrument 43-101. Mr. West has revi ewed the technical information in
this news release and approves the disclosure contained herein.
About Trilogy Metals
Trilogy Metals Inc., formerly NovaCopper Inc., is a metals exploration company focused on
exploring and developing the Ambler mining district located in northwestern Alaska. It is one
of the richest and most-prospec tive known copper-dominant dist ricts located in one of the
safest geopolitical jurisdictions in the world. It hosts world-class poly metallic VMS deposits
that contain copper, zinc, lead, gold and silv er, and carbonate replac ement deposits which
have been found to host high grade copper mi neralization. Exploration efforts have been
focused on two deposits in the Ambler mining district - the Arctic VMS deposit and the Bornite
carbonate replacement deposit. Both deposits are located within the Company's land package
that spans approximately 143,000 hectares. The Company has an agreement with NANA
Regional Corporation, Inc., a Regional Alaska Native Corporation that provides a framework
for the exploration and potential development of the Ambler mining district in cooperation with
local communities. Our vision is to develop the Ambler mining district into a premier North
American copper producer.
Company Contacts
Rick Van Nieuwenhuyse Elaine Sanders
President & Chief Executive Officer Vice President & Chief Financial Officer
604-638-8088 or 1-855-638-8088
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Cautionary Note Regarding Forward-Looking Statements
This press release includes certain "forward-looking info rmation” and "forward-looking statements” (collectively
"forward-looking statements”) within the meaning of applic able Canadian and United St ates securities legislation
including the United States Private Securities Litigation Reform Act of 1995. All statements, other than statements of
historical fact, included herein, including, without limitation, statements relating to our outlook, the future operating
or financial performance of the Comp any, planned expenditures and the an ticipated exploration and development
activity, including with respect to the drilling at Bornite, the timing of drill results at Bornite, the preparation of a PFS
on the Arctic deposit and timing of its release, and the potential exercise of the option by South32 are forward-looking
statements. Forward-looking statements are frequently, bu t not always, identified by words such as "expects”,
"anticipates”, "believes”, "intends”, "estimates”, "potential”, "possible”, and similar expressions, or statements that
events, conditions, or results "will”, "may”, "could”, or "should” occur or be achieved. Forward-looking statements
involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and
actual results and future events could differ materially from those anticipated in such statements. Important factors
that could cause actual results to differ materially from the Company's expectations include the uncertainties involving
the need for additional financing to explore and develop properties and availability of financing in the debt and capital
markets; uncertainties involved in the interpretation of drilling results and geological tests and the estimation of
reserves and resources; the need for cooperation of government agencies and native groups in the development and
operation of properties as well as the construction of the access road; the need to obtain permits and governmental
approvals; risks of construction and mining projects such as accidents, equipment breakdowns, bad weather,
non-compliance with environmental and permit requirements, unanticipated variation in geological structures, metal
grades or recovery rates; unexpected cost increases, which could include significant increases in estimated capital and
operating costs; fluctuations in metal prices and currency exchange rates; and other risks and uncertainties disclosed
in the Company’s Annual Report on Form 10-K for the year ended November 30, 2016 filed with Canadian securities
regulatory authorities and with the United States Securities and Exchange Commission and in other Company reports
and documents filed with applicable securities regulatory authorities from time to time. The Company's
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forward-looking statements reflect the beliefs, opinions and projections on the date the statements are made. The
Company assumes no obligation to update the forward-looking statements or beliefs, opinions, projections, or other
factors, should they change, except as required by law.